Archive for 2013

Educating school-age children is the state of Oklahoma’s biggest responsibility. But in recent years, our investment in education has been on a severe decline. Since 2008, Oklahoma has made the third largest cuts to per pupil spending in the nation, behind only Arizona and Alabama.

Faced with an avalanche of criticism from parents and schools over these cuts, lawmakers are claiming to have boosted education funding for 2014. The proposed budget does include additional money to cover rising health care costs and various education reforms. However, it would provide little new support for the most basic budget needs of schools.

This year’s state budget provided no additional dollars for common education, even as total state appropriations grew by 3.2 percent. Over the past four years, state support for common education has fallen 11.4 percent while public school enrollment has grown by 25,000 students. In part, the decline in state education funding reflects the overall drop in state appropriations that accompanied the economic downturn and full phase-in of the tax cuts of the mid-2000’s. But as can be seen from this graph, common education’s slice of the overall pie is shrinking:

In FY 2013, just 34.1 percent of total appropriations goes to common education. This is the lowest share since at least FY 2000 (and likely the lowest share since 1992 when HB 1017 was implemented). In FY 2004, common education received 38.2 percent of total state funding and in FY 2008, just before the downturn, it received 35.9 percent.

These numbers likely understate the situation because they do not take into account the income tax revenues that previously went to the General Revenue Fund and now go directly to the ROADS fund. This fund, created in FY 2006, will receive $297 million in FY 2013; if that amount was added to the $6,825 million appropriated budget, common education’s share of the budget drops to 32.7 percent.

As students head back to school this month, they will encounter an education system facing a crisis in funding. Over the past four years, state support for public schools has been slashed by $220 million, or 11 percent, while school enrollment has increased by some 25,000 students. This equals a 14 percent decline in state support per person. In schools across the state, class sizes are larger, course offerings are fewer, and many school services have been reduced or eliminated. At the same time, schools are wrestling with new mandates for student testing, teacher evaluations, and reading proficiency that must be implemented with reduced resources. Meanwhile, Oklahoma voters this fall will vote on two state questions that would reduce local property tax revenues for schools, while federal education support could be cut by roughly one-tenth to one-fifth under various deficit reduction plans.

Oklahoma voters are paying attention and expressing their discontent. Eight-eight percent of Oklahoma voters are very concerned (64 percent) or somewhat concerned (24 percent) about cuts to local public schools, according to a new Oklahoma Poll published in the Tulsa World. More than three in five voters (61 percent) believe that the state Legislature is not doing enough to fund public schools in Oklahoma. The poll also found that more than nine in ten voters said that a candidate’s position on funding for public schools is very important (65 percent) or somewhat important (29 percent) in determining their vote in November’s elections.

These findings that education funding is a major concern for voters reinforces an earlier poll conducted while Oklahoma legislators were considering proposals for major income tax cuts. Only 16 percent of Oklahoma voters said they would “favor cutting funding to Oklahoma’s public schools so that the savings can be passed along to taxpayers in the form of a tax cut”, compared to 81 percent who disagreed, including 67 percent who disagreed strongly.

In recent years, education has not been a priority of Oklahoma legislators. Most areas of state services absorbed cuts when the state was grappling with large budget shortfalls. But even though total appropriations has increased this year by $253 million, education funding has remained flat. Common education’s share of total appropriations has fallen to 34.1 percent, the lowest level since at least FY 2000. These polls results show that voters are paying attention and aren’t happy about the Legislature’s priorities. Whether legislators and the Governor heed the message remains to be seen.

This week’s announcement of General Revenue (GR) collections for the first month of the new fiscal year (FY 2013) provided mixed news for both overall collections and the performance of particular major taxes.

Overall GR in July was $382.7 million. This is $6.4 million, or 1.7 percent, above last year. However, as the chart below shows, state revenues have yet to fully recover from the collapse that accompanied the last economic downturn. This year’s July collections remain 15 percent below four years ago and are still not back to where they were a full six years ago.

Most major taxes showed growth compared to last year, showing continued strength in the state economy. July sales tax collections were up 9 percent from last year and are 6.5 percent above their pre-downturn peak. By contrast, while income tax collections were up 20.7 percent from last year, FY 2013 income tax collections remain 20 percent below their peak in FY 2007. This reflects both the continuing impact of income tax cuts that have phased in over the past eight years and the allocation of an increasing share of income tax collections to the ROADS fund and other purposes.

The FY 2013 budget negotiated by legislative leaders and Governor Fallin had some encouraging aspects. Overall appropriations increased by $253 million, or 3.8 percent, and there was additional funding for targeted priorities in human services, health care, transportation and public safety. However, despite a grassroots lobbying campaign by concerned parents and strong statements from school officials about the deepening school funding crisis, education ended up as odd-man-out when it came time to allocate new dollars.

In the 1960’s, Richard Fariña titled his novel of his college days and experiences, “Been Down So Long It Feels Like Up To Me.” The sentiment might also apply to the state budget for the upcoming year. After being down so long – three straight years of shrinking budgets and cuts across almost all areas of state government – a budget that provides flat funding for most agencies as well as some targeted increases may “feel like up”. However, the FY 2013 budget still falls well below pre-downturn levels and will continue to strain the capacity of most state agencies and school districts to fulfill their core functions [click here for our FY 2013 Budget Highlights brief].

The Legislature approved a FY 2013 budget of $6,855.8 million (appropriations were all made in SB 1975, except $3 million for common education in SB 1535). This is $252 million, or 3.8 percent, above FY 2012 final appropriations of $6,603.1 million, which includes supplemental funding. The increase follows three consecutive years of shrinking budgets and cuts across almost all areas of state government. As the graph below shows, even with this year’s increase, the FY 2013 budget remains $269 million, or 3.8 percent, less than peak levels of four years ago (FY 2009).

NOTE: This post has been updated to reflect slightly revised numbers in state aid funding for FY 2008 and FY 2012. The text has been corrected to correspond.

The FY 2013 budget agreement announced yesterday provides no increase in state aid for public schools. The Legislature did provide additional dollars to ensure that health benefits for teachers and support staff would be fully funded in 2013, along with bonuses for Board-certified teachers. However, the General Appropriations Bill, SB 1975, appropriates $1.816 billion for FY 2013 in funding that gets distributed to school districts through the state aid formula to pay salaries and general operating expenses. This is the same amount as in FY ’12.

As can be seen from the graph below, the proposed flat funding for public schools in 2013 follows three straight years of cuts in state aid. Since FY 2009, state aid funding has declined by $221 million, or 10.8 percent. Since the 2007-08 school year, public school enrollment has increased by 24,429 students. This equates to a 14 percent decrease in state support per student, from $3,163 to $2,726. In addition, since the beginning of 2008, inflation has boosted the overall costs of goods and services by 9 percent.

State Superintendent Janet Barresi requested an increase of $78.2 million in state aid funding for FY 2013 to return to FY 2011 levels. More recently, parents and educators had urged the Legislature to boost state aid funding by $50 million to avert further teacher layoffs and loss of programs. The failure to provide any additional money to support schools despite allocating $33 million for cuts to the top income rate, is sure to be regarded by many as a grave instance of misplaced priorities.

Oklahoma Policy Institute released the following statement in response to the state budget deal announced today:

According to today’s budget agreement, appropriations for core services remain flat even though expenses continue to rise. That means we will fall further behind what Oklahomans need and expect state government to do.

We can already see the result in rising class sizes and tuition costs, roads and public buildings going unrepaired, and public safety workers and caregivers for the most vulnerable who remain overburdened and underpaid.

At the same time, the legislature is considering cutting revenues by more than $30 million in the upcoming year and more than $100 million in 2014. If we continue to put tax cuts ahead of investments in our shared responsibilities, we risk seriously harming Oklahomans’ quality of life, making the state a worse place to do business, and pushing off more debts onto the next generation.

Source: OK Policy Note: Gross production tax revenues are from production months, two months prior to date of tax remittance

This article appeared in the April 2012 edition of the Oklahoma Economic Report, a publication of the Office of State Treasurer Ken Miller. It is reprinted here in its entirety with permission.

It seems that each day brings another story of record low natural gas prices and record high supplies. A warmer-than-normal winter in the United States drove down natural gas demand this year at a time when prices usually rise and supplies are reduced.

As a result, natural gas in storage is at or near record levels while prices are at their lowest in more than a decade. The U.S. Energy Information Administration (EIA) estimated natural gas in storage at the end of March at 2.48 trillion cubic feet, about 57 percent higher than at the same time last year.

According to Bloomberg, the average spot price in April at the Henry Hub in Louisiana was $1.99 per thousand cubic feet (mcf) as of April 27.

After three straight years of budget cuts, funding for public education in Oklahoma is in dire straits. This year’s appropriation to the Department of Education is $254 million, or 10.0 percent, less than it was in 2009. In the past three years, funding to school districts through the state aid formula, which funds the basic operating costs of schools, has been slashed by $222 million, while public schools enrollment has grown by 22,000 students. According to the most recent data, the number of teachers was cut by over 1,000 between 2010 and 2011, and this year it is likely there are fewer teachers still. Even though schools have tried to manage cuts while protecting class sizes, simple math dictates that more students and fewer teachers is leading to more kids per class.

Meanwhile, the Legislature has also cut the activities budget for common education, which funds health care costs for teachers and support staff, as well as a portion of retirement costs and programs that aim to improve teacher quality and student performance. This year, the Department of Education was forced to eliminate or drastically cut a slew of programs, including adult education, alternative education, Great Expectations, A+ Schools, and Literacy First. With its activities budget slashed, the department also opted not to allocate $11.4 million to fund the $5,000 annual bonus promised to some 3,300 National Board Certified teachers and saved $37 million by funding only ten months of teacher and support staff health care benefits for current year contracts. Outrage in the education community over this failure to meet the state’s commitments on health care costs and board certified teachers led some elected officials to promise to make up the funding as mid-year supplementals to this year’s budget.